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Bookkeeping/Accounting Terms questions with answers graded A+
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Bookkeeping/Accounting Terms questions with answers graded A+
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Bookkeeping/Accounting TermsAccounting - correct answer ✔✔The process of recording and communicating financial information that
is intended to be useful in making economic decisions.
Entity assumption - correct answer ✔✔A business is considered a separate entity distinguishable from its
owners, creditors, employees, and all other entities.
Asset - correct answer ✔✔Resources owned by a business that have money value.
Cost principle - correct answer ✔✔Business transactions are entered in the accounting system at cost
which includes purchase price, sales tax, freight, and any other cost needed to prepare the asset for sale
or for its intended use.
Liability - correct answer ✔✔The debts owed by a business.
Creditors - correct answer ✔✔The person or entity to whom the debt is owed.
Owners' equity - correct answer ✔✔The owners' interest in the assets of the business (net worth).
Capital stock - correct answer ✔✔Refers to all classessof ownership, shares, both preferred an common,
issued by a corporation.
Accounting Equation - correct answer ✔✔Assets = Liabilities + Owners' equity
Owners' equity = Paid-in capital + Retained earnings
Retained earnings = Beginning balance + Revenues - Expenses - Dividends
Financial statements - correct answer ✔✔Final result of the accounting process that serve as important
communication devices---2 types (Internal and External statements).
, Internal statements - correct answer ✔✔Are prepared at the request of mangement for the sole use of
managers within the firm.
External statements - correct answer ✔✔Are prepared specifically for use by outside parties such as
creditior and stocklholders--- 4 types (Income statement, Retained earnings statement, Balance sheet,
Statement of cash flow).
Fiscal year - correct answer ✔✔The period (any 12 consecutive months) the firm selects for reporting.
Calendar year - correct answer ✔✔An accounting period that extends from January 1 to December 31.
Natural business year - correct answer ✔✔Twelve-month period that ends when a company's sales
activities are at their lowest point.
Interim reports - correct answer ✔✔Financial statements prepared for periods shorter than one year,
such as monthly or quarterly. (IMA)
Income statement - correct answer ✔✔A summary of the revenue and expenses for a specific period of
time, such as a month,quarter, or year.
Revenues - correct answer ✔✔Inflows of assets or settlements of liabilities from delivering or producing
goods, rendering services, or sales.
Expenses - correct answer ✔✔Assets used up or services consumed in the process of generating
revenues during an accounting period.
Gains - correct answer ✔✔Increases in net assets from incidental transactions that are not revenues or
investments by owners.
Losses - correct answer ✔✔Decreases in net assets from incidental transactions that are not expenses or
distributions to owners.
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